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December 13, 2005
Use of Retention Bonuses on the Rise

More than half (51 percent) of employers offer retention bonuses for temporarily keeping key employees during times of transition, up from 46 percent in 2001 and 36 percent in 1998, according to a survey of 1,030 human resources executives conducted by Lee Hecht Harrison, a career services company.

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The fast changing global business environment is producing more scenarios in which organizations need to retain temporarily employees tagged for separation, says Bernadette Kenny, executive vice president at the firm.

"Such scenarios include offshoring and outsourcing as well as mergers and acquisitions, plant closings, facility relocations and corporate restructurings that require the redistribution of work," Kenny said. "Retaining key employees during these events helps to facilitate a seamless transition."

Of the respondents whose organizations offer retention bonuses, 57 percent say they are individually negotiated for senior executives, 52 percent for executives, 40 percent for professionals, and 38 percent for administrative employees.

Among respondents whose organizations offer retention bonuses, 35 percent say they do so as additional severance and 21 percent say they do so as a percent of salary, accoridng to Kenny.

Companies that calculate retention bonuses as a percentage of salary typically give senior executives, executives, and professionals more than 11 percent of salary. Those companies that calculate retention bonuses as an amount of additional severance tend to give senior executives either 1-2 months or 3 months of additional severance, while most executives, professionals, and administrative employees are given 1-2 months.

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